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Industry news update- June 2009
12th Jun 2009
Below is a quick update of this week’s industry news.
Financial Times
04/06/09
Latvia flop sparks bond fears
• Latvian economy is forecasted to shrink by 18% this year, while its budget deficit is estimated at 9% of G.D.P
• A failed Latvian government debt auction yesterday sent tremors across the financial markets as investors feared that emerging nations would struggle to find buyers for a huge wave of sovereign debt .The failure to raise any money in the auction of short term treasury bills was due to the fear that Latvia would have to devalue its currency, the lat because of its economic woes
• Although the emerging market bond issuance has picked up, investors are reluctant to lend to the weaker economies
• The Hungarian forint saw the biggest fall, tumbling 1.97% against the Euro and 2.85% against the dollar, with other nations such as Poland and the Czech Republic all reporting losses against the Euro and the dollar.
• The Baltic states’ currencies are all pegged to the Euro and Swedish banks would be hit the by companies and consumers struggling to pay back foreign currencies
Financial Times
04/06/09
Heron resumes dividends with £17m
• Heron International, the property company run by the property company Gerald Ronson is to pay a dividend of £17.2m to its investors this year
• The last dividend Heron paid at the beginning of 2007 was £80m, although this reflected a one-off boost from the sale of a stake in Crest Nicholson
• Heron’s net asset value was reported at £384m at the end of 2008, a moderate decline from £409.6m in 2007. Heron sold many of its investments in the UK before the slump, while its European assets haven’t been as badly hit
• ‘We are in for a difficult period of time. There will be more unemployment than people expected. In the last recession, it was stay alive till 1995, then go to heaven in 1997. And we are looking at 3-5 years again from now for recovery.
Financial Times
04/06/09
Emerging Markets Outpace the West
• FTSE emerging markets risen 41.1% since Jan
• Risen 60.8% since March
• Chances of China showing growth of more than 8% despite the economic crisis are high
• China, India and Russia will become the engine of world growth for a while (Vikram Pandit of CityGroup)
• BRIC possibly becoming BIC due to fragility of Russia’s banking system, a predicted slow down in growth to 6.4%, their reliance on oiland high levels of political risk
• Emerging market equities have greatly outperformed their developed world peers- accelerating risk appetite.
Financial Times
04/06/09
Smooth Ride in these rocky times
• In the current economic climate train makers are building up large order books and are cutting factory capacities closer to the size they need
• Train makers are benefiting from public policy- governments are a key source of funding because they want to maintain investment in infrastructure and the environment
• Freight locomotives are benefiting from the long term shift from road to rail, but they are also suffering from the slump in volumes of goods moving
• A slow down of orders is expected, but still on a high level
• No impact so far on rail infrastructure and signaling
• Pressure to become more energy-efficient, with growing concerns about the environment. (lighter trains, could mean less freight locomotives)
• This is resulting in manufacturers considering radical design changes (reducing wheels, reduced wiring and lighter shell construction)
• This trend could create an opening for Japanese Shinkansen trains, which have long been the lightest and fastest in the industry
• “Any innovation that reduces maintenance costs over a train 30-year life is almost certainly worthwhile, even if it pushed up initial cost” (Rod Smith from railway engineering at London’s Imperial College)
• Big train-makers have to simplify product ranges to cut research and development costs
• The big three European manufacturers- Bombardier Transportation (Berlin), Alstom (France), and Siemens (Germany)
• Siemens have gone from working with 120 platforms to 10, they are also set to announce a tram platform to be known as Avenio at the International Union of Public Transport Congress in Vienna, and closing factories in Slovenia and the Czech Republic
